You can make contributions to your Roth IRA when you’re 70 ½ years old. You can leave amounts in your Roth IRA as long as you live. The account or pension must be identified as a Roth IRA when set up. There is no age limit for opening a Roth IRA, but there are income and contribution limits that investors should be aware of before financing one.
Let’s take a look at the pros and cons. The RMD policy ensures that you pay tax on your savings after being tax deferred for years. As you might have guessed, Roth IRAs are the only accounts that don’t require minimum payouts at any age. Because these accounts are funded with after-tax dollars, Uncle Sam doesn’t benefit from your withdrawals.
Of course, this requires that you comply with the “qualifying withdrawal rules” set forth by the IRS. Even high-income earners who are unable to directly finance a Roth IRA can use this strategy, also known as a backdoor Roth IRA. If you don’t plan to stop working until you reach retirement age, you may want to continue making IRA contributions. However, regardless of your age, you can still contribute to a Roth IRA and make rollover contributions to a Roth IRA or a traditional IRA.
As mentioned earlier, the IRS doesn’t allow contributions to a traditional IRA after age 70, making a Roth your only IRA option from that point on. Just as you can only contribute to your IRA up to a certain age, most IRAs require the required minimum distributions (RMDs) as soon as you reach 70.5 or 72 years of age, depending on your birthday. A Roth IRA may be better than a traditional IRA for people who want to save on taxes in retirement if they expect to earn more later than now. The distribution rules for a Roth IRA can also help you if you intend to bequeath your IRA to your heirs.
If you have a significant amount of money in traditional IRAs, turning some of that money into Roth money not only helps you avoid the required minimum distributions (RMDs), but can also help your heirs keep more of the money you leave them by not having to pay taxes from them on your traditional IRA, which they inherited in their potentially highest-earning years. Remember that people who are 70½ years of age or older and contribute to a traditional IRA, SIMPLE IRA, or SEP IRA must still claim RMDs even if they are still working.